March 22, 2006

Open Source in the Future

Analyst Clay Ryder has an interesting piece at IT-Director.com: “Why we won’t be talking about Open Source in the future.” Here’s an excerpt:

While people have the need to segment out what is new and/or different from what they know, the reality is that from a bits and bytes perspective, open source software is no different than any other. It is code that runs on the machine and hopefully solves a problem and delivers value to the end user. The development model and the pricing model vary, as do issues related to intellectual property and ownership, but at the end of the day it is just software.

Well – he’s right and he isn’t. Certainly from a “bits and bytes” perspective software is software. But from the perspective of impact on the industry, open source is anything but the same. Think for a second about the huge changes that open source is causing… first, the decline of the perpetual license. Perpetual license is simply a term for a big up front payment to begin using the software. It makes a decision to use a piece of software more difficult for obvious reasons, and makes the evaluation process more difficult. Open source is changing that model – just download and try it. Then buy a support contract if you want one.

Second, IT people have always wanted to be able to see much more of what's actually going on with the software they use – to have a look at the code for troubleshooting and to fill out any gaps in the documentation. Difficult in the old way – easy with open source.

So as this evolution continues, software companies will need to adjust their business models – by charging for the real value add in terms of support and new releases – typically far less than the perpetual license. And due to the availability of products for download and evaluation over the Web, they will make up for the perpetual license with reduced sales and marketing expenses. Btw - This has the added benefit of giving software companies incentives to be sure that the software they make available on the Web is solid, and doesn’t need a lot of handholding.

In both cases – customers win. And software companies that figure this out win too.